Articles Posted inFinancial Fraud

Canada’s weak money-laundering laws, especially when it comes to real estate monitoring, has left areas like British Columbia vulnerable as an attractive place to store ill-gotten cash. The main way this works is through buying real estate with little to no information to verify the identity of those involved in the purchasing. In 2018 alone, $5 billion was laundered through real estate in British Columbia.

Many proprietors of ill-gotten funds will often attempt to hide them by first mixing them with legitimate proceeds. This can include something like a business they operate. They then will transfer these funds into a bank, which are limited in how much information they can gather about the client’s day-to-day transactions. Finally, these funds are funneled into shell companies, or companies known to only be made for financial juggling, and then in some cases use those companies to buy up real estate in tax havens that will allow for tax breaks as well as the anonymity they require.

For these launderers, houses, condominium floors, and mansions can all act as a sort of bank account. While it may not be physically active money, they are assists in the form of bricks-and-mortars that keep their finances safe and sound. This system usually leaves a good portion of vacant properties, which naturally causes real estate prices to rise.

The Department of Financial Services of New York has launched an investigation into popular tax preparation services including TurboTax, which was developed by Intuit, and H&R Block. According to their investigation, these services may have purposefully hidden free tax programs from qualifying customers using deceptive coding techniques and Google Ad strategies.

A total of four tax preparation software companies received subpoenas for similar alleged offenses at the beginning of this month. Mainly, investigators demanded information regarding the programs that were marketed as ‘free’ for users who earn under $66,000 in yearly income.

News of the scheme came to light as users reported being unable to locate the free services being offered. When users signed on to utilize the tax preparation services they were often automatically directed to more costly programs. According to the investigation, many consumers requested refunds after being directed to the more expensive versions of the service but were lied to about their eligibility in an effort to disqualify them from their desired refund.

Solar Fish was reported by FTI Consulting to have received a payment of $355 million from six different parties. While on the surface it comes off as a simple financial transaction, this payment is suspected to be for the sale of a number of Russian fishing firms that the company controlled in secrecy.

Solar Fish is a company that has previously been at the center of trade finance fraud that went above $5 billion. Now caught up in this new scandal, there is a risk of deep reprehension.

The $354.5 million the company received from the six parties was exchanged between Jan. 28, 2013 and Feb. 5, 2013, with a strong chance this was from the sales of a pollock and herring catching firm, now known as Russian Fishery Company (RFC).

Deutsche Bank is facing legal action for its involvement in a $20 billion Russian money-laundering scheme, known as the Global Laundromat. Upon the announcement of these allegations, Deutsche Bank expressed its deep concern of “significant disciplinary action” in a confidential report by The Guardian.

According to the report, Deutsche Bank was found to be involved in an extensive scheme which was linked to criminals formerly involved with the Kremlin, as well as the KGB and FSB. The money-laundering scheme took place between 2010 and 2014 when an estimated $80 million was moved into western-based accounts. In order for Russian funds to make their way into the US and Europe, shell companies were used to create and send falsified loans back and forth to each other. Eventually, the shell companies would purposely default on the loan, allowing judges involved in the scandal to authenticate the debt. The billions of dollars in illegal funds were then routed to the desired accounts using the Deutsche Bank network.

However, according to the report, Deutsche Bank was unaware of its part in the global money laundering scheme until 2017 when The Guardian published their initial report. Today, Deutsche Bank not only faces the embarrassment of its unknown involvement but also risks diminishing its overall market value as investors continue to drop their shares given the reports of the scandal.

Former whistleblower, Everett Stern, states that the crackdown on financial fraud still has a way to go before it can truly be considered a successful pursuit.

A whistleblower is considered anyone who has insider information about a fraudulent act and decides to come forward to law enforcement about such activities. Anyone can be a whistleblower, and if they decide to pursue the matter legally, they will be acting in the name of the government. The government can then choose to step in and settle the matter if they find it to be a worthy endeavor that can benefit from their direct support.

Stern was a whistleblower involved in the case of HSBC, a British bank that was accused of money laundering activities. Stern assisted in this case by providing essential insider information about the bank’s financial details to law enforcement authorities. This case eventually ended in a $1.9 billion fine in repercussions from HSBC.

A whistleblower by the name of Rudolf Elmer claimed that during his work as a private banker and internal auditor for the Swiss financial institution, Julius Baer Bank & Trust Company Ltd., he discovered actions that he found to be deceitful when relocated to the Cayman Islands. When Elmer acted as a whistleblower in this situation, instead of being supported in his efforts, he was fired, removed from the financial world, given time in prison, and even suffered a mental breakdown.

Whistleblower is a legal term that signifies anyone who chooses to report a person or organization for illicit activity. A large portion of whistleblowers are insiders and have directly interacted with the company in question as an employee.

Whistleblowers have the right to take legal action in the government’s name while the government may choose to step in at any point of the process to handle the allegations they find particularly detrimental or unlawful. The United States has a set of laws in place that are designed to protect whistleblowers known as the Whistleblower Protection Act, which has been around for over 30 years with the last major update being in 2012.

According to a report released earlier this month, U.S. companies are increasingly shifting imports from China to countries like Vietnam, South Korea, Mexico, and Taiwan, in an effort to avoid the high tariffs imposed on Chinese purchases during the current trade war.

With the current trade war waged on China, President Donald Trump has imposed tariffs of up to 25% on the purchase of Chinese products. This dramatically increases the overall costs that U.S. companies are looking to spend, causing them to search for new alternatives. According to S&P Global Market Intelligence, the number of containerized freight imported from China fell 6.4% in the first corner. In order to avoid paying the high tariffs, U.S. companies have rerouted the majority of their purchases to less expensive countries. However, many companies also chose to order mass purchases from China ahead of the tariff increases in an effort to stockpile their products.

Many of the companies choosing to reroute their imports are associated with the furniture industry, but these are not the only markets struggling to avoid tariffs. While large furniture retailers, like Home Depot and Target, decreased Chinese imports by up to 13.5%, appliance retailers like Samsung and LG were also part of a major shift in Chinese imports.

The destructed land left from the acts of deforestation is an eerie sight. A distant treeline, fallen logs, and disrupted vegetation seem both natural and unnatural, and perhaps rightly so. In a recent investigation performed by Victor Galaz and members of the Stockholm Resilience Center, many acts of Amazonian deforestation can be directly linked to foreign tax havens. Why? Because there’s lots of money to be made in the destruction of these forests, which are eventually used by massive beef and soy companies to turn a profit. However, the fish industry, worth over $23 billion annually, is yet another market at the root of environmental destruction by use of oversea tax havens.

The Link Between Overfishing and Tax Havens

There is a reason why fishing boats are given a daily fish quota, as well as restrictions on the species of fish that they can keep; The environment. The practice of overfishing is capable of wiping out entire species. However, this can be viewed as limited profits for the companies involved in these restrictions; less fish equals less profits. For companies like this, it’s tempting to find a way around these regulations, and foreign tax havens offer the perfect opportunity.

According to a list by Oxfam, a charitable organization that works to alleviate global poverty, Bermuda is the worst corporate tax haven in the world. Joining Bermuda on this list are fourteen other tax havens, which include the Cayman Islands and British Virgin Islands. But, what makes Bermuda stand out among the others noted on this list?

Creating The List

Oxfam did not take the creation of this list lightly. In order to determine the tax havens that belonged on the list, Oxfam carefully researched numerous factors, including the presence of exceptionally low or nonexistent corporate tax rates and unfair tax incentives. Oxfam also took into consideration the cooperation, or lack of cooperation, of these tax havens in regards to international regulations designed to combat tax evasion. During its extensive research, Oxfam found that Bermuda and other British territories were among the worst tax havens in the world. This is especially true when considering the United State’s use of these tax havens.

Charlie Jinan Chen, a Boston restaurant owner, is accused of insider trading of Vistaprint stock after illegally receiving confidential information from a former Vistaprint employee. His wife, Shui Foon Mak, is also being charged for her part in reaping the illegal profits, which are believed to be in excess of $850,000. But, how did this all work?

Insider Information Leaked from 2012-2014

Vistaprint is an eCommerce platform that specializes in selling customizable business materials and other products. From 2012-2014, Chen received insider information from an employee of Vistaprint, identified only as “Jenny” in court documents. Jenny was an accounting manager that reportedly handled Vistaprint’s quarterly financial statements, which included confidential information that would remain unavailable to the public prior to a set date for release. It was this information that Chen allegedly used to generate fraudulent profits.